PROBLEMS WITH INDECORP SALE;COMMUNITY PROTESTS SHAKE BANK FUNDERS

Shorebank Corp.'s campaign to raise $15 million for its planned buyout of Indecorp Inc. is threatened by growing community opposition.

Large Chicago institutions that hold stakes in Shorebank fear reprisals by activist groups that want control of Chicago's biggest African-American-owned banking concern to stay in minority hands. And these institutions see little financial or political incentive to invest in the deal.

"There's a whole different context today," said Gary Washington, a senior vice-president at Chicago-based LaSalle National Corp. "It makes an equity investment at this stage much more difficult."

The acquisition would double Shorebank's size to $550 million in assets, expand its deposits and widen its redevelopment efforts, while giving Indecorp's aging owners a long-sought chance to cash out and retire.

Chicago-based Shorebank needs a total of $31 million to complete the deal. The sale price is $26.5 million-just $500,000 more than the final offer made in a failed deal last year with Detroit banker William T. Johnson, an African-American-plus $4.2 million for a preferred-stock buyout and transaction costs. Shorebank proposes borrowing $16 million to finance the deal, according to documents filed at the Federal Reserve Bank of Chicago.

But fund-raising is proving difficult, and Shorebank also is trying to quell community protest. Milton Davis, a founder of Shorebank's lead bank, South Shore Bank, and one of six top executives trying to muster investor support, in recent days has met with more than a dozen representatives of housing groups and neighborhood development associations.

Among local institutions, only Bank of America Illinois has committed funds-$2.5 million-to the buyout effort since it was announced in mid-June. Bank of America Illinois Chairman William Goodyear is an adviser to Shorebank's board.

Other banks that invested more than $1 million each in Shorebank in 1993, including First National Bank of Chicago, Northern Trust Co., Harris Bank and LaSalle National Bank, are on the fence.

The political climate has changed dramatically since then. Regulatory pressures to reinvest in disadvantaged communities have eased considerably. Tolerance for investments with low returns has dimmed, and all four banks have opened branches that compete with Shorebank.

First Chicago, in particular, faces a dilemma. Failure to invest in Shorebank could be seen as a slight to local communities at a time when First is trying to prove that its own merger with Detroit's NBD Bancorp Inc. will not lessen its commitment to Chicago.

On the other hand, First is loath to alienate community groups that could complicate regulatory approval of its merger with NBD. Still stinging from protests over its $3 teller fee, First is looking to avoid negative headlines.

Shorebank's Mr. Davis argues that his bank's lending record should weigh more heavily than its owners' race in any investment decision.

"From our perspective, there is no conflict there," said Mr. Davis, who is black. "If you look at the 22-year history of Shorebank, there is no doubt that it plays a vital role in developing the communities in which it operates."

But in failing to forge alliances before the merger was struck, Shorebank may have underestimated the power of neighborhood leaders to derail its plans. To many, the prospect of selling black-owned Indecorp to a white-controlled company is unthinkable.

Angelo Rose, chairman of the South Side's federal empowerment zone and a community activist, lamented: "We can't make gains in this society without an institution that supports our community."

Other prominent African-American business people express sadness over the potential loss of another black enterprise. In some cases, the response is visceral and racially charged.

The Rev. Al Sampson, chairman of Metropolitan Area Black Churches, is part of a group collecting signatures to protest the merger to the Federal Reserve Bank of Chicago, which must approve the deal. A product of the civil rights era who saw the creation of Indecorp's lead bank, Independence Bank, in 1964, Mr. Sampson takes the bank's possible sale personally. "We think that Indecorp has double-crossed the black community," he said, calling the deal an "illicit midnight relationship of economic prostitution."

Observers say it's unlikely that bank regulators would deny Shorebank's acquisition proposal based on its lending record. The bank is highly regarded for its community development.

And no other buyers appear to be stepping up to the table at Inde-corp's asking price. "I have received no offers," said CEO Alvin Boutte, one of three key Indecorp shareholders.

Mr. Sampson intends to call on big guns to persuade Mr. Boutte, George Johnson and Cirilo McSween not to sell to Shorebank: "We feel that Jesse Jackson has a responsibility, as he attempts to run for president, to preside over these three men."

If the deal does go through, vows Mr. Sampson, black ministers will pull church deposits out of Indecorp and urge their congregations to do the same. Other community leaders say they would direct business to other black institutions.